Treasury zooms in on tender fraud
Civil servants and political officials who have taken advantage of the poorly managed government procurement system to win lucrative tenders through companies in which they have links, will be flagged and exposed by a new system being devised by the treasury.
No one questions that billions are being lost to problematic procurement practices.
The auditor general’s most recent state audit revealed that about R600-million in state tenders was awarded to suppliers linked to the families or employees of departments awarding the tenders, and this does not include officials who are employed by one department but doing business with another.
Examples include a number of Limpopo government contracts awarded to On-Point, a company in which former ANC Youth League head Julius Malema had shares through his Ratanang Family Trust.
And then there is the investigation into Pikitup, concerning allegations that a company linked to its former managing director, Zami Nkosi, may have benefited from tenders.
Kenneth Brown took up the position of the state’s chief procurement officer in March this year, something many consider an unenviable task, to set up and head an office aimed at reducing procurement fraud and to restructure the government’s procurement process to make it more efficient. He is looking to technology to address the fraud.
Modernising the system through ICT
The South African Revenue Service has already made use of an integrated system both to speed up the tax payment system and to flag anomalies in tax returns.
In an interview with the Mail & Guardian, Brown, who was formerly head of intergovernmental relations in the treasury and headed the task team brought in to assist the cash-strapped Limpopo, said the modernisation of the procurement system with the use of information communication technology was a priority.
“We are looking at moving away from paper towards electronic bids, which would mean that tax clearance would not have to be submitted by the bidding companies but would be assessed automatically when the bids are submitted electronically.
“Once the system gets plugged into other bodies, it wouldn’t be necessary for a list of directors to be supplied because the system would be able to tell us who the directors are and if they are government employees. Cipro [the Companies and Intellectual Property Registration Office] could help us to see if the company exists.”
A challenge is still how to identify trusts or family members who are involved in the companies.
He said there were currently 98 000 suppliers delivering goods and services to the government and a solution had to be found that could encompass a wide range of services and products.
Challenge with restructuring
“The challenge facing my office is how to restructure the entire data base so it can look at the whole process. Keep in mind we [the government] presently have 110 provincial departments, between 39 and 40 national departments, 278 municipalities and 200-odd public entities.”
Rather surprisingly, Brown said his review of the supply chain management system revealed that it was world-class and was internationally recognised. Where the system fell flat was in implementation.
“The first focus has to be on capacity building and training of government staff to ensure that they know what is required for a tender and how to enforce compliance,” he said.
“The other issue is modernisation and training officials to make use of technology and using it to train officials.”
Brown envisages that it would become mandatory for departments to put three- to five-year procurement plans in place, which would be drawn up after an assessment of the departments’ needs.
“This way departments or public entities will know when they are likely to run out of supplies and what goods they will need in the future.”
Eliminating tender irregularities
This will ensure the right quantity and quality is planned for and commissioned, which would eliminate tender irregularities. A pilot project with the department of health in Gauteng has been useful and is yielding positive results.
The standardisation of procurement contracts is also on the cards. “The intention is to make it easy for officials to pull out a standard contract which can be signed,” he said.
Brown said more pressure would be placed on provincial governments’ treasury divisions to take a more active role in oversight of tender processes in term of the Public Finance Management Act.